North-Eastern region

Invest in North-East Romania – Investor’s Guide (by ADR NE)

 SWOT ANALYSE

Strengths Weaknesses
  1. Workplace
  • Romania ranks 1st in Europe as a number of qualified programmers;
  • High qualification of the labor force;
  • University tradition in technical fields;
  • Aprox. 1000 graduates in IT yearly;
  • IT studies are internationally recognized;
  • Romanians generally have well-developed linguistic skills;
  • Development of the IT&C industry in the proximity of university centers offering specialized technical training;
  • Firm orientation of companies to prepare their own employees.

 

  1. Economy
  • Dynamics of the IT&C industry;
  • Location of important companies in the region;
  • Multinational companies have transferred / opened activities / work places in the region;
  • High share of RDI expenditures in Romanian GDP made by Iasi and other university centers;
  • Well diversified business infrastructure in the territory;
  • High share of the number of enterprises that have the site, the staff that used the computer and increasing the use of hi-tech solutions by companies;
  • High penetration of mobile phone services;
  • Well-developed broadband infrastructure in urban areas;
  • Rich offer of office buildings and spaces suitable for IT&C activities.

 

  1. Educational infrastructure
  • The existence of the university centers in Iasi, Bacau and Suceava, with 7 public universities and 4 private universities.

 

  1. Public Administration and legislation
  • Liberalization of the telecommunications market;
  • Exemption of income tax for programmers;
  •  Personal data security and intellectual property improved after EU accession.
  1. Workplace
  • Specialists demanding is higher than the market offer;
  • Missing or insufficiently covered specializations;
  • salaries in IT&C domain have risen sharply;
  • Invasion of companies by graduates who demand huge salaries for few or absent skills.

 

 

 

2. Economy

  • Regional division in terms of digital;
  • Low Region contribution to national GDP formation (smallest contribution);
  • Low level of foreign investment;
  • Low contribution to total exports;
  • Low percentage of households with pc / laptop equipment;
  • Low number of SMEs in the IT&C region compared to Cluj and Timisoara;
  • The size of SMEs and, implicitly, their ability to invest in IT&C;
  • Poor use of e-commerce and e-banking solutions at regional level by companies.

 

 

  1. Educational infrastructure
  • Continued decreasing of the number of students (between 2006-2011 it decreased by 16.8%).

 

  1. Public Administration and legislation
  • Poor use of e-government, e-health, e-learning applications by public administration;
  • IT spending and GDP per capita are very low in the Region;
  • Low importance for certification, standards and quality control.
Opportunities Dangers
  1. Human resources
  • The region develops its own IT & C competencies, including through clustering actions;
  • Reclassification of graduates with non-technical studies for IT & C.

 

 

 

  1. Economy
  • The possibility of developing trade due to the location of the region on the eastern future border of the European Union;
  • Access to new markets by developing e-commerce solutions and uses;
  • High penetration of internet services among companies;
  • The projected reduction in the inflation rate and the implicit decrease in the cost of the credit;
  • Switching to higher added value industry segments;
  • Entry into niche markets of software products (creative industries, games, etc.);
  • Orientation of products / services to export.

 

  1. Educational infrastructure and RDI
  • The possibility of developing the business environment as a result of the construction of industrial and scientific parks and business incubators;
  • The high share (approximately 50%) of RDI and SMEs competitiveness from ERDF for 2014-2020.

 

  1. Public Administration and legislation
  • The possibility of modernizing the airports in the region to support the regional business environment and to become locations for new investments;
  • Increased interest in cluster development;
  • Elaboration of the National RDI Strategy 2014-2020 and the Intelligent Specialization Strategy of the North-East Region 2014-2020;
  • Declining tariffs for Internet and Telecommunication Services.
  • Internal market with considerable potential (over 20 million inhabitants, the second largest after Poland).
  1. Human resources
  • Brain-drain – continuing the exodus of „gray matter” to other regions and abroad;
  • Continuing the process of decreasing the population of higher education;
  • High competition for qualified staff;
  • Increasing of company fluctuations (head-hunting phenomenon);
  • Human resources crisis in IT&C;
  • Decreasing the qualification level of the labor force.

 

2.Economy

  • International economic recession;
  • Exposure to the globalized market;
  • Wage growth in the sector, which has already led recruitment agencies to start recruiting staff from less developed neighbors (Republic of Moldova, Ukraine);
  • Competition with Asian countries (India, Pakistan);
  • 40-60% increase of the projects made in the Region for clients from the country and abroad;
  • Poor competitiveness of the profile companies in the region with those of the member states after Romania’s accession to the EU;
  • Further increase in population poverty in the region.

 

  1. Educational infrastructure and RDI

 

  • Continuing decline in the number of researchers.

 

 

  1. Public Administration and legislation
  • Lack of cohesion of the economic and social development measures;
  • Instability of legislative provisions on fiscal framework;
  • Lack of support tools for the IT&C industry;
  • Lack of representation to date, both at regional and national level;
  • Non-competitive practices, growing piracy;
  • The increasing number of electronic crimes.

 

THE PROFILE OF NORTH-ESTERN REGION

Although it is the largest development region of Romania in terms of the number of inhabitants and of the area owned, the North-East Development Region is on the last place as a level of development. Intra- and inter-regional disparities increased over the period 2005-2008, although regional gross domestic product, per capita, increased in real terms. From the existing statistical data, the disparity index continued to decline – regardless of the global economic context (both in the period of growth and recession), down from 66.7% (2005) to 61.4% (2010). Relative to the Community average, the North-East Region figured with a disparity index of only 29%. The main factors determining the low level of development of the North-East Region are:

(1) lack of economic opportunities for the rural population:

  • 57% (over 2 million people) of the region’s population lives in rural areas;
  • of these, more than half a million are employed in agriculture, generally subsistence agriculture;

(2) low competitiveness of the economic environment:

  • active enterprises in the Region have a reduced labor productivity, lower than the national average of 30%;
  • surprisingly, along with trade and manufacturing, the lowest productivity is registered in communications and information, as determined by the modest contribution made by the research, technological development and innovation sector and by the reduced transfer and the implementation of results by the productive sector;
  • the share of R & D expenditures at the regional level accounts for only 0.3% of the regional gross domestic product, which is, in fact, decreasing;
  • In addition, out of the total amount of RD spending, only one third is made by SMEs;
    • there are many RDI units operating in the region at the level of research institutes, higher education institutions, agricultural stations and economic agents. The development of research and excellence centers within the universities in the region, recognized by the National Council for Scientific Research (12 Centers of Excellence established within the higher education institutions in Iaşi), has been noted in recent years.
    • total expenditure in this sector accounted for only 0.29% of the regional gross domestic product (2009), decreasing compared to 2007-2008. At the same time, the largest part of intake was brought by the counties of Iasi and Suceava.
    • at the level of 2010, expenditures from public funds were almost four times higher than those of the private sector. It is worth noting that, over the period 2006-2008, the share of expenditures from public funds increased to 86.2%, although during the crisis to drop to 70%.
    • Regarding the evolution of the number of employees in the RDI sector, the North-East Region was one of the few regions which in the past registered an increasing trend, reaching 4,172 persons in 2008. As a result of the effects of the economic and financial crisis, the activity of the research units has limited, the number of employees decreasing to 3.376 in 2010. Practically, at the end of 2010 the total number of RDI employees represented only 8.64% of the total existing at national level. At the same time, for every 10.000 civilian employed only 28 employees are recruited from RDI.
    • one of the important issues of research in the region derives from the fact that the results obtained do not correspond to the needs of the companies and can not be effectively exploited in production.
  • The limited development of IT&C and the low penetration of Internet services (especially in rural areas) are obstacles to the transition to the knowledge economy. Thus, the number of enterprises with services and/or products in the field of IT C represents only 8% of the national total, with a modest contribution to the national turnover on this segment.
  • at the same time, only 36% of households have access to the internet, 50% do not have computer equipment, and 50% of the population has never accessed the Internet.
  • low economic productivity also leads to a low level of exports, with only 4,3% of the total volume of Romanian exports being provided by the region – most of the companies are addressed by products and services provided to the national market.
  • The total number of enterprises with technological innovation (those that have launched new goods or services or significantly improved new processes) in the region represent 13,4% of the existing total at the national level, representing 791 fime. Of these, three-quarters work in the industry and a quarter in services. At the same time, three-quarters are businesses with up to 50 employees, and the rest are medium and large. Analyzing the situation by type of innovation, 48% of them have launched both a product and a new process, 36% a new process, and 16% a new product.
  • Given that the economic crisis will continue and aggregate demand and public investment will stagnate, real growth in regional gross domestic product can not be sustained in the absence of interventions dedicated increasing of competitiveness and innovation.
  • the low level of attractiveness, especially of rural areas and small and medium-sized towns:
  • most of the region’s small and medium-sized cities face a low level of attractiveness due to a complex of economic, social, environmental factors. In most cases, the existing technical town infrastructure is out of date, and the adjacent villages are not connected to utility networks.
  • accessibility and mobility within the localities are limited by the high degree of wear of city streets, the lack/deficient of parking space, the lack of alternative forms of transport (bicycles, ecological transport, etc.).
  • the low level of private investment made and the effects of the economic and financial crisis have led to a reduction in existing jobs. The lack of attractive job and leisure opportunities leads many graduates to establish their domicile in other more developed urban areas.